The Canadian dollar has been one of this month's top-performing currencies as markets increasingly believe the Bank of Canada has concluded its easing cycle and entered a prolonged pause in monetary policy. Expectations for tomorrow's rate hold are fully priced in, and the Canadian dollar could extend gains if Governor Tiff Macklem confirms this outlook.

The market widely expects the central bank to keep interest rates unchanged following nine rate cuts over the past 17 months. In late October, Macklem hinted that policymakers may have paused rate cuts after lowering the policy rate to 2.25%. While the central bank continues to emphasize that the economy is undergoing a “difficult transition” due to structural damage caused by the U.S.-China trade conflict, it also notes that monetary policy has limited scope to stimulate demand while maintaining stable inflation.

Subsequent data releases have further reinforced the case for holding rates steady.

Third-quarter GDP grew at an annualized rate of 2.6%, exceeding the Bank of Canada's forecast of 0.5%. November saw 54,000 new jobs added, continuing the steady growth momentum from September and October. Underlying inflation remains above the 2% target and may prove more persistent than the central bank anticipates. These developments further reinforce the conclusion that the easing cycle is nearing its end.

Markets will watch whether Macklem explicitly reaffirms his long-term suspension stance in the statement and press conference. Clear communication on this front could further bolster the Canadian dollar's strength in early 2026.

However, given current expectations and market pricing, the Canadian dollar is unlikely to experience significant volatility, especially considering that market focus is centered on the Federal Reserve's decision later today.

During Wednesday's European trading session, USDCAD traded near 1.3850. The pair has remained below the 200-day SMA of 1.3912 throughout its recent sharp decline, with bears continuing to dominate. The 200-day SMA had been rising gradually before flattening out, signaling a weakening trend strength. Failure to reclaim the 200-day SMA would keep downward pressure intact.

We anticipate a strong rebound following a break below the recent low of 1.3799. Should prices rise directly to the prior support level of 1.3936 (now acting as resistance), the upside potential would be limited.

Trading Direction: Buy

Entry Price: 1.3780

Target Price: 1.3950

Stop Loss: 1.3700

Valid Until: December 26, 2025 23:55:00

Support: 1.3799, 1.3780, 1.3748

Resistance: 1.3904, 1.3923, 1.3950

The British Pound has maintained its composure near multi-year highs against the Japanese Yen this week, trading around the 208.90 level, as broad-based Yen weakness continues to underpin the pair. Attempts to push the currency lower have been consistently contained above 208.20, suggesting a firm bullish bias among market participants.

The Japanese Yen’s decline against its major peers is being driven by a combination of disappointing economic growth data and mounting concerns over the fiscal outlook in Japan. Prime Minister Talkaichi’s cabinet recently announced plans for an ambitious USD 137 billion stimulus package, aimed at supporting domestic demand but raising questions about fiscal sustainability. Investors are now weighing the economic benefits of the stimulus against potential pressure on Japan’s already stretched public finances, which has weakened confidence in the Yen.

Technically, the GBP/JPY pair has capitalized on these supportive factors. The pair established an additional support level around 206.90, gaining positive momentum as confirmed by key indicators. This bullish strength allowed the pair to rally to 208.90 yesterday, achieving the initial target outlined in our previous analysis. Following this rise, the pair entered a phase of sideways consolidation, which market watchers interpret as a healthy accumulation period that often precedes a continuation of upward trends.

Looking at the immediate technical landscape, the GBP/JPY shows no signs of retreating from its bullish trajectory. A decisive breach above 208.60 has opened the door for a further rally, with the next target projected around 209.30. Beyond this, the pair could extend towards the 261.8% Fibonacci extension level near 211.00, a key area where profit-taking and resistance may surface.

BUY GBPJPY

ENTRY PRICE: 208.70

STOP LOSS: 207.50

TAKE PROFIT: 211.00

The USD/JPY pair extended its three-day winning streak on Wednesday, hovering just below the 157.00 mark during the European session, as traders positioned themselves ahead of a pivotal Federal Reserve rate decision later in the day. The move underscores persistent structural weakness in the Japanese Yen, even as the US Dollar trades with a softer tone across the broader market.

The US Dollar Index (DXY), which tracks the Greenback’s performance against six major counterparts, slipped toward 99.10 — not far from last week’s five-week low at 98.75. The subdued dollar price action reflects a market increasingly confident that the Federal Reserve will deliver a 25-basis-point cut, bringing the federal funds target range down to 3.50%–3.75%. With the US labor market showing clear signs of fatigue since the start of the year, investors appear fully aligned with the Fed’s dovish trajectory.

Federal Open Market Committee (FOMC) members have gradually prepared markets for this moment. Chair Jerome Powell and others have repeatedly flagged “downside risks” to employment, hinting that restrictive policy settings may no longer be justified amid slowing economic momentum. New York Fed President John Williams reiterated this stance in late November, noting that “economic growth has slowed, and the labour market has gradually cooled,” adding that the economy still has “room for further rate cuts.”

While the interest-rate adjustment is widely expected, the real market-moving catalysts will likely be the updated dot plot and Powell’s press conference. Investors will look for any indication of whether the Fed leans toward a one-and-done approach for 2025 or signals an extended easing cycle. A more cautious message could cap USD gains, but continued concerns about labor-market sluggishness could encourage further downside yield repricing, ultimately keeping the Yen on the defensive despite the softer Dollar.

The Japanese Yen, for its part, remains under broad pressure as concerns about Japan’s fiscal trajectory overshadow support from the Bank of Japan’s slow-moving policy normalization. Revised Q3 GDP data released Monday showed a deeper-than-expected contraction of 0.6%, compared with a preliminary estimate of 0.4%. The weak print amplified worries about Japan’s fragile recovery and growing government debt burden, prompting traders to scale back expectations of any near-term BoJ rate hike.

For many in the market, the Yen narrative has evolved from a simple rate-differential story to a broader skepticism about Japan’s macro-economic resilience and its ability to commit to tighter monetary policy. This macro divergence continues to anchor USD/JPY in an upward trend, even as the Dollar softens against other majors.

From a technical perspective, USD/JPY remains firmly within a bullish structure despite recent consolidation. The pair briefly retreated during intraday trading after encountering stiff resistance at 156.75 — a level that has capped several upside attempts and now serves as the key threshold for further gains.

Prices remain supported by the 50-period Exponential Moving Average (EMA50), which continues to offer dynamic support as long as the pair trades above it. The broader bullish trend also remains intact as USD/JPY holds well outside the prior bearish corrective channel. However, the Relative Strength Index shows signs of overbought conditions, with negative overlapping signals suggesting a temporary loss of momentum.

Still, the market appears to be gathering fresh bullish energy. A decisive break above 156.75 would likely open the door toward 157.50 and potentially toward the psychological 158.00 level, provided the Fed does not deliver an unexpectedly hawkish message. Conversely, failure to clear resistance could trigger a mild pullback toward 155.80, though any downside is expected to remain limited unless the Fed surprises significantly.

BUY USDJPY

ENTRY PRICE: 156.60

STOP LOSS: 155.80

TAKE PROFIT: 158.00

The Canadian economy has shown remarkable resilience, exceeding expectations. Real GDP grew at an annualized rate of 2.6% in the third quarter, significantly higher than the Bank of Canada's October Monetary Policy Report forecast of 0.5%. This growth was mainly driven by a surge in federal defense spending and a substantial improvement in net exports. The labor market has been particularly strong: 54,000 jobs were added in November, bringing the cumulative gain since September to 181,000, and the unemployment rate fell to 6.5%, very close to the lower end of the Bank of Canada's estimated natural unemployment rate range (6.3%–6.8%). Regarding inflation, the year-over-year CPI in October was 2.2%. The Bank of Canada's preferred three core inflation measures averaged between 2.9% and 3.1%, remaining stable. Rent remains a key upward pressure due to its sticky nature. These data have largely eliminated the need for further rate cuts. The market has fully priced in a hold at the December 10 meeting with the policy rate unchanged at 2.25%, and the probability of any rate cuts throughout 2026 has dropped below 15%. The mainstream view among institutions is that, unless there is a major external shock, the Bank of Canada will keep the policy rate anchored at its current level—considered neutral to slightly tight—for an extended period, and may even retain the option to raise rates slightly if needed to curb rent inflation.

According to the CME FedWatch Tool, there is an 87.6% probability that the Federal Reserve will cut interest rates by 25 basis points at its December policy meeting. This would mark the third consecutive rate cut. The U.S. economy is showing characteristics of "slowing growth but not stalling, with persistent inflation." October JOLTS data showed a slight rebound in job openings to 7.67 million, but hiring fell further to 5.149 million, the lowest since the pandemic. Both the quit rate and layoff rate declined, indicating that the labor market has entered a new equilibrium state of "high vacancies, low-hire and low-fire." Structural reasons for the weak hiring appetite include slowing net immigration on the supply side and rapid AI-driven replacement of entry-level white-collar jobs on the demand side. In the lead-up to the December FOMC meeting, with no fresh nonfarm payroll data available, the market still expects the Fed to deliver a 25-basis-point cut, bringing the rate down to 3.50%–3.75%. However, the median dot plot is expected to revise the 2026 year-end federal funds rate higher to 3.75%–4.00% (from 3.25%–3.50% in September). The Fed will face significantly more external constraints in 2026 than before. Fed Chair Jerome Powell's term will end in February 2026, and the nomination and Senate confirmation process for his successor is expected to be highly politicized. The Trump administration has filed a lawsuit over whether the president can fire Fed governors at will; a win could directly undermine the Fed's statutory independence. The current Board of Governors and FOMC voting members are generally hawkish, and the composition of rotating voters in 2026 is expected to shift further rightward, increasing internal resistance to rapid and significant rate cuts.

From a daily perspective, USD/CAD has broken below the 200-day Exponential Moving Average (EMA200) and is trading along the Bollinger Lower Band, suggesting a high likelihood of further downside toward the previous low near 1.373. A death cross emerges with both the signal and MACD lines falling below the zero axis, indicating a bearish trend. The RSI is at 33, placing the market in oversold territory, yet the short-term downtrend continues. Based on the 4-hour chart, the Bollinger Bands are expanding downward, and the moving averages are diverging to the downside. Although the MACD has formed a golden cross, the signal and MACD lines are still some distance away from returning to the zero axis, meaning the bounce is not yet complete. However, the strength of the rebound is weak, signaling strong bearish momentum. Support levels are found near the psychological integer level and the Bollinger Lower Band at 1.38 and 1.376, respectively. The RSI is at 38, reflecting a bearish sentiment in the market. Therefore, it is better to sell now and then buy.

Trading direction: Buy

Entry price: 1.373

Target price: 1.42

Stop loss: 1.357

Support: 1.38/1.373/1.357

Resistance: 1.414/1.42/1.44

Recently, the crypto market has experienced shifts in capital flow dynamics: despite net outflows from some Bitcoin-related ETFs, multiple reports indicate that Ethereum-focused products are attracting fresh institutional and retail investment. Specifically, data shows that on December 9, the U.S. market saw a net withdrawal from Bitcoin ETFs, while non-Bitcoin cryptocurrencies, including Ethereum, witnessed substantial capital inflows.

Meanwhile, multiple market analysis firms indicate that current capital flows are shifting from risk assets, such as technology stocks and small-cap equities, towards cryptocurrencies in pursuit of returns and liquidity. This trend is particularly pronounced during year-end portfolio rebalancing, especially in environments characterized by low yields on stablecoins and increased uncertainty in traditional bond and equity markets.

Additionally, the narrative circulating within the crypto community and institutional circles—that "smart money is accumulating Ethereum on dips"—has positively influenced market sentiment. Most analysts believe that the overall cryptocurrency market remains underheated, with sufficient capital inflow and market confidence supporting the potential for intermediate-term upward momentum.

In the 1D timeframe, Ethereum has found support near 2,700 following a recent two-month decline, with candlestick patterns forming a double bottom, thereby reinforcing the support level and catalyzing a sustained bullish rebound.

Currently, Ethereum has approached the resistance zone around 3,400, indicating increased short-term upward pressure. A brief correction may occur; however, the relative strength index (RSI) remains in a neutral to slightly bullish territory, suggesting limited downside momentum and a market sentiment leaning toward bullishness.

On the upside, a strong breakout above the 3,400 resistance could open further gains toward the 3,600–3,700 range. If market liquidity continues to improve and capital inflows persist, Ethereum is likely to recover its medium- to long-term bullish trend.

On the downside, initial support is identified at the 3,000 level. A breach below this support could lead to further declines toward the 2,700 support level.

Trading Direction: Buy

Entry Price: 3260

Target Price: 3700

Stop Loss: 3070

Valid Until: December 24, 2025 23:00:00

Support: 3240, 3000

Resistance: 3400, 3700

On Tuesday, BoJ Governor Kazuo Ueda told reporters after the policy meeting that the recent surge in long-term yields has been "too fast," with the 10-year JGB hitting an 18-year high. If the rise "deviates from normal market moves" the Bank will act flexibly, including stepping up JGB purchases.

With U.S. growth and tariff uncertainties receding, Japan's growth-and-inflation outlook has improved, he said. The BoJ is now collecting firms' wage plans for FY-2025. Should the labour market remain tight and upward pressure on wages and prices intensify, the Bank will "adjust the degree of monetary accommodation as needed" to keep markets stable and steer the economy onto a sustainable path.

In a separate FT interview Ueda struck an optimistic note, expecting underlying inflation to "continue gravitating" toward the 2% target. He also stressed the need to monitor the impact of rising food prices and the yen's persistent weakness on inflation expectations.

The U.S. labor market is stagnating. Job openings rose 12,000 to 7,670,000 in October, beating consensus. However, hires dropped 218,000 to 5,149,000. A combined two-month release, September data were delayed by the government shutdown, shows neither clear expansion nor mass layoffs. Labor supply is shrinking as immigration slows, a trend that intensified in the final year of the Biden administration and is accelerating under Trump's second term. Meanwhile, AI deployment is eroding demand for entry-level workers.

Against this backdrop, markets price a 25 bp cut to 3.50-3.75 %. Policymakers lack fresh payroll and inflation prints, complicating the call. With the 2025 FOMC finale looming, the Fed is heading into turbulence extending into 2026. Chair Powell’s term ends in May 2026; President Trump is expected to name a successor—possibly advisor Kevin Hassett—in early 2025, with handover in June. Unlike Powell’s prior bipartisan confirmations, the next nomination will spark fiercer political friction, as the Trump administration openly seeks greater Fed influence while Congress largely defends central-bank independence.

A policy rift has opened inside the FOMC: several Reserve Bank presidents oppose further cuts, while the three Trump-appointed governors lean toward easing. The 2026 voting slate skews hawkish, complicating any rapid easing push. Trump is seeking an additional seat by removing Governor Lisa Cook. She sued and the Supreme Court let her stay. The final ruling set to shape Fed independence. Treasury Secretary Scott Bessent has also questioned the residency credentials of some regional presidents, whose five-year terms all come up for renewal in early 2026.

On the daily chart, the Bollinger Bands on USDJPY are contracting while the moving averages are flattening, indicating that a volatility expansion is imminent. A strong bullish candle has pushed price back above the EMA12. If USDJPY can remain above 156, the pair is likely to retest 158 or even 160. After the MACD bearish crossover, the fast and slow lines are still some distance from the zero axis, suggesting the correction is not yet confirmed to be over. RSI reads 61, reflecting strong bullish sentiment. Immediate resistance is seen at the upper Bollinger Band around 157.70 and the psychological 160 level.

On the weekly chart, the Bollinger Bands are widening upward and the moving averages are diverging bullishly, keeping the broader uptrend intact. The MACD bullish crossover has pulled both lines back above the zero axis, and the EMA12 is grinding higher, both hallmarks of a robust rally. Weekly RSI is at 68, showing investors remain net buyers. Therefore, the short-term strategy favors buying dips.

Trade Direction: Buy

Entry Price: 155.8

Target Price: 158.8

Stop Loss: 153.5

Support: 154.7/153.2/150

Resistance Levels: 157/158.8/160